Making Tax Digital (“MTD”) for VAT came into force on 1 April 2019. As a result of these provisions, it is now mandatory for all VAT-registered businesses with a taxable turnover above the registration threshold (currently £85,000) to keep digital records and submit their VAT returns quarterly through HMRC-approved software, using an application programming interface (API).
The previous method of submission via the HMRC portal is now unavailable. HMRC must approve any opt-out under minimal circumstances.
In addition to the digital submission requirement, specific data must be recorded digitally within ‘functional compatible software’ (FCS). The FCS can be a software program or a set of software programs (including spreadsheets, provided certain conditions are met) that must be capable of the following:
- Holding all the mandatory digital data as required under MTD;
- Submitting the nine VAT return figures to HMRC for the MTD-specific API;
- Receiving information from HMRC via the API;
- Transferring data between software programs via a ‘digital link’.
Who will be impacted first?
- April 2019—All businesses above the VAT threshold (£85,000) will be required to keep digital records and file their VAT returns using MTD-compliant software.
- April 2020 – The timings for MTD for corporation tax have yet to be confirmed, but it will not become mandatory before April 2020.
- 2020 – All those who complete self-assessment tax returns – self-employed, partnerships, trusts and landlords – don’t yet have a set date for mandatory income digital tax reporting.
This affects all VAT returns for VAT periods starting on or after 1 April 2019 (October 2019 for deferred business), so individuals and companies need to follow the new process.
How we can help with Making Tax Digital for VAT
- Help support you via our free technical material to learn more about MTD for VAT.
- Check if your accounting software is MTD-ready and on HMRC’s “approved” list.
- Complete a VAT review to ensure you are MTD-compliant
- Provide in-person training to your Tax team
- Help you get ahead of the curve – other taxes are planned to go digital in 2020